3 Oil Stocks to Consider if You Missed Occidental

Over the past few weeks, Warren Buffett has purchased shares of Western Oil Company NYSE:OXY to increase his net stake to 29%, which is not Buffett’s usual behavior. When the Oracle of Omaha invests this much – and quickly – in a stock, there has to be a good enough reason to justify these quick and aggressive moves.

While there is enough evidence to support a bullish rotation in the energy sector, what investors need to know today is that they should not let fear of missing out (FOMO) guide their decisions today, because following Buffett’s Western stock buying might be “too late” to follow the moment. By analyzing its reasoning for choosing Occidental and not its peers, investors can look to three similar companies to ride the current oil wave.

Starting in this leading group is ConocoPhillips NYSE:COP, sharing some characteristics with Occidental, enough to make it a potential Buffett buy for retail investors as well. Next on the list is Marathon Oil Co. NYSE:MROwith a similar level of factors to support it as a potential watchlist addition, and last but not least, there is API Shell NYSE:SHEL. Here’s what they all have in common with Occidental.

Why Oil Stocks Could Dominate the Market in 2024 and 2025

Historically speaking, the second half of the year is always a good time for oil. But today, there is much more than just past data to support a thesis for the industry. The latest ISM Manufacturing PMI trends show that, despite a contraction, oil was the only sector to show signs of recovery.

With a sharp rise in employment, new orders and production, the industry appears poised for increased demand and activity in the months ahead.

Seeing how the Select Energy Sector SPDR Fund NYSEARCA: XLE has underperformed the overall S&P 500 by as much as 12% over the past year, investors can rely on these PMI trends to close this performance gap.

ConocoPhillips Stock Discount Gets Wall Street’s Attention

The stock is now trading 83% off its 52-week high, which can look like a discount once investors see other valuation metrics, like the one that led Buffett to buy shares of Occidental.

ConocoPhillips stock is valued at about 13.8x today, compared to Occidental’s 8.5x on a price-to-free cash flow basis. Although it is not as cheap as Buffett’s, investors can still exploit the future upside prospects of this name.

Wall Street analysts are now forecasting earnings per share (EPS) growth of up to 17% for ConocoPhillips stock this year, leading to higher price targets. Those at Truist saw fit to increase the valuation of ConocoPhillips stock up to $165 per share, challenging it to rebound 48.2% from its current trading level.

While Buffett couldn’t come and buy ConocoPhillips stock today, Price T Rowe Associates (the stock’s largest shareholder) bought it during the last quarter. The asset manager increased its stake in ConocoPhillips shares by 35.8%, bringing its net investment to $4.1 billion today.

Marathon Oil Stock Reeling From Buffett Oil Move, Short Sellers React

For Marathon Oil, short interest has decreased by more than 5.6% over the past month. Buffett’s presence in the oil sector may have scared off these short sellers, but even aside from that factor, Marathon Oil has enough merit to benefit from the kind of upside it is showing today.

Wall Street analysts are now forecasting 15.5% EPS growth for the company over the next 12 months. Based on these projections, Scotiabank analysts saw fit to increase Marathon Oil’s valuation up to $45 per share, challenging it to rebound approximately 62% from its trading level current.

Based on these factors, Vanguard Group, the largest shareholder of Marathon Oil, decided to strengthen its position in the stock by 10% during the last quarter. This purchase now represents a value of $2.2 billion for Vanguard.

The company’s $15.5 billion market cap would value the stock at about 7.6x on a price-to-free cash flow basis. This deal is not only cheaper than the ConocoPhillips deal, but also more attractive than the one Buffett was able to make.

Shell stock valuation boosted by Wells Fargo analysts

Wells Fargo analysts led the way on Wall Street in becoming bullish on Shell shares. Today, they are looking at a price target of $90 per share, which represents approximately 28.7% upside from the current stock price.

As for Marathon Oil stock, short sellers were spooked by Buffett’s entry into the energy sector. Over the past month, short interest in Shell shares has fallen 5.3%, leaving more room for institutions to acquire these additional shares.

T Rowe Price increased its position in Shell by 13% over the past quarter, bringing its net investment to $450 million today. According to Shell’s financial data, the stock’s $224 billion market cap would give investors a price-to-free cash flow multiple of 7.2x, an even better deal than Buffett found for Western stocks.

Before you consider the SPDR Energy Select Sector Fund, you’ll want to hear this.

MarketBeat tracks Wall Street’s top-rated and top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches up…and the Energy Select Sector SPDR fund wasn’t on the list.

Although the Energy Select Sector SPDR Fund currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are Better Buys.

See the five actions here

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